TOKYO, Dec 1 (Reuters) - The Nikkei stock average
surged to a two-week high, breaking above a major resistance
level on Thursday, after the world's central banks took
coordinated action to ease funding strains among banks caused by
the debt crisis in Europe.

The central banks' move to offer cheaper dollar funding
eased worries about an immediate meltdown in the global
financial system, but market players remained cautious about
prospects for resolution of the crisis.

"This just means they expanded emergency measures. The more
important point is whether Europe is going to have a bigger
bailout fund, and that's still up in the air," said Soichiro
Monji, chief strategist at Daiwa SB Investments.

Volume spiked to its highest since Oct. 28, with 2 billion
shares changing hands on the main board, up 29 percent from its
20-day average.

The benchmark Nikkei rose 1.9 percent to 8,597.38,
climbing above its 25-day moving average of around 8,577 and
rising at one point to 8,653, its highest level since Nov. 14.

The broader Topix index climbed 1.6 percent to
740.01.

But selling by European pension funds continued,
underscoring the potential for distress in the euro zone to push
the market lower.

"A lot of blue chips are being bought, simply because they
dropped to rock bottom last month," said Masayoshi Okamoto, head
of dealing at Jujiya Securities.

"For the short term it would be safer to buy defensives and
stocks dependent on domestic demand in case of sudden exchange
rate moves or European concerns."

The Nikkei faces more resistance from its 75-day moving
average around 8,687 and above that the daily Ichimoku cloud
looms at 8,704-8,746.

But Yutaka Miura, senior technical analyst at Mizuho
Securities said he did not expect the benchmark to get near the
Ichimoku cloud ahead of a meeting of European leaders on Dec. 9,
a summit seen as a make-or-break moment for the region.

With the expiry of Nikkei December futures options due next
Thursday, the option strike price of 8,750 may also become a
resistance point, market participants said.

CHINA-RELATED STOCKS SOAR

Construction makers and shippers, the main beneficiaries of
China's booming economy, were among the top performers after
China's central bank cut reserve requirements for commercial
lenders on Wednesday for the first time in three years.

Shares of drugmaker Daiichi Sankyo Co Ltd rose 2
percent to 1,400 yen after U.S. authorities gave its subsidiary
Ranbaxy Laboratories Ltd the green light to make the
first generic version of Lipitor, a blockbuster
cholestrol-lowering drug.

Japanese financials bounced back from recent losses, with
the banking sub-index gaining 1.6 percent, buoyed by
gains in their U.S. counterparts. Sumitomo Mitsui Financial
Group climbed 3 percent, and Mitsubishi UFJ Financial
Group rose 3.1 percent.

Nomura Holdings Inc was up 2.8 percent at
255 yen, after earlier climbing to its highest level in almost a
month. The investment bank's shares fell to its lowest in
almost 37 years last week, as thin trading volumes and withering
share prices threatened brokerages' profit outlooks.